Chapter Three Questions Flashcards
Interim financial statements:
cover less than one year, usually spanning one-, three-, or six-month periods
Annual reporting periods can cover:
a calendar year.
A 52-week period
12 consecutive months.
(All of above)
The primary difference between the accrual basis and the cash basis of accounting is:
Accrual basis records revenues when delivered and incurred. Cash basis records revenues when cash is received and paid.
The revenue recognition principle requires that revenue be recorded:
when the goods or service are provided to customers.
Place the steps in the three-step adjusting process in the correct order
Determine what the current account balance equals.
Determine what the current account balance should
Record an adjusting entry to get from step 1 to step 2.
Adjusting entries affect…
One or more balance sheet accounts and one or more income statement accounts.
Prepaid expenses reflect transactions when cash is paid…
Before the related expense is recognized.
Before the adjusting entry for a deferral of an expense, the expenses will be _____ and the assets will be _____.
Understated; overstated
An adjusted trial balance includes which of the following accounts:
all accounts and their balances
Place the steps in the four-step closing process in the correct order
Close the revenue accounts
Close the expense accounts
Close the income summary account
Close the dividends account
Identify the accounts that would appear on the post-closing trial balance.
permanent accounts
Determine how much revenue is recognized in December (using accrual basis accounting): On December 7, Oklahoma City Thunder sold a $122 ticket to a basketball game to be played in March.
0
Determine how much revenue is recognized in December (using accrual basis accounting): Tesla sold and delivered a $90,000 car on December 25. The customer will not pay until February.
90,000
Determine how much revenue is recognized in December (using accrual basis accounting): Deloitte signs a contract on December 1 to provide 40 days of advisory services with receipt of $42,000 due at the end of the contract. On December 31, 75% of the services have been completed.
31,500
Determine the amount of expense each company should recognize in December (using accrual basis accounting): Chipotle has monthly wages expense of $4,000 that has been incurred but not paid as of December 31.
4,000
